After much deliberation, the U.K. parliament has voted to retain its one-penny and two-pence coins. Though the copper coins had been singled out for possible removal from the country’s monetary system, the government ultimately decided that, in the words of Finance Minister Philip Hammond, “people still rely on cash, and the public should choose how to spend their money.” The vote has rekindled talk in the U.S. about the removal of its own penny from circulation. In light of this, President of U.S. Money Reserve and former U.S. Mint Director Philip N. Diehl recently appeared on CNN to discuss the subject. Below, you will find an overview of the contentious topic, along with more information on Diehl and the precious metals company he now heads.
History of the Penny
Though the one-cent coin was the first currency authorized by the U.S. government upon establishing its mint, the penny did not feature former president Abraham Lincoln until 1909. From that time forward, the coin has held a special significance in U.S. culture as not only a store of market value, but also as a celebration of one of the country’s most esteemed heads of state. Though the coin has featured a number of different designs on its reverse, including a simple wheat head design and the Lincoln monument, it has featured the former president on its obverse continuously since 1909.
The coin’s composition, however, has changed over the years and is part of the focus of modern calls to do away with the currency altogether. Historically, the penny was known as a copper coin, and at the outset of World War II, it was composed of 95 percent copper and 5 percent zinc. Due to wartime restrictions on the use of certain metals and later cost increases of copper, the coin underwent a number of compositional changes after the outset of the war. Though it initially switched to a composition primarily of steel, the modern-day penny now has a makeup that is 97.6 percent zinc and only 2.4 percent copper.
Cost Associated with the Penny Coin
The makeup of the coin is relevant to the discussion of whether or not to do away with the penny for a number of reasons, as it affects both the environmental impact of the penny’s production and its cost. Philip N. Diehl, President of U.S. Money Reserve, touched on that last point when discussing the issue with CNN’s Richard Quest. “It costs almost twice as much to make the penny as it’s worth,” said Diehl.
Part of the high cost to which Diehl referred stems from the origin of the zinc that composes the bulk of the one-cent coins. That zinc comes primarily from China at a significant cost to the U.S. In fact, experts estimate that zinc imports to support penny production have added approximately $2.1 million to the already large trade deficit that the U.S. maintains with China. When one factors in current political tensions surrounding trade between the two countries, as well as potential environmental concerns from zinc mining practices, it becomes clear that the cost of pennies extends beyond mere monetary considerations.
These types of complex public-sector considerations are all too familiar to Diehl, who served as the 35th director of the U.S. Mint before his current position at U.S. Money Reserve. During that time, he instituted dramatic moves with respect to the nation’s currency, which included creating the popular 50 States Quarters Program and the launch of the first-ever U.S. government–issued platinum coin. Before his time at the Mint, he held roles in both the U.S. Department of the Treasury and the U.S. Senate Finance Committee.
Diehl drew on his time at that range of government institutions when discussing the potential discontinuation of the penny on CNN. “When I was director of the U.S. Mint, I advocated for the elimination of the penny,” said Diehl. “In reality, it should have been eliminated 35 years ago or so.”
Additional Reasons for Discontinuation
Cost of production, while important, is just one of the many reasons that experts have put forth for removing the penny from circulation. One of the most glaring issues with the currency is that the public has largely moved away from its usage in recent years. Diehl touched on this aspect during his CNN interview as well, saying that “only about a third of all transactions are conducted in cash. When people receive [pennies], they often throw them away. They put them in penny jars.” This sentiment has been famously underscored by the economist N. Gregory Mankiw, who said that “when people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful.”
The idea has also gained plenty of public support in recent years. “People just don’t find it to be a useful coin,” noted Diehl. “That’s been confirmed in several polls that show that 80 percent of Americans are ready to be done with the penny. It’s a hassle, and it’s largely useless.” Since a presumed sense of nostalgia has been one of the driving factors in keeping the penny around for so long, changing public sentiment surrounding the issue may prove to be a deciding factor in the coin’s ultimate demise.
While there does seem to be widespread support for phasing the penny out, a number of groups would far rather keep the penny around. One organization, known as Americans for Common Cents, has been a vocal critic of measures to remove pennies from circulation. The group cites alternate polls, economic concerns, and charitable usage as reasons why the one-cent coin should remain in existence.
Diehl is cognizant of the groups who would prefer to keep the penny around and mentioned them during his appearance on CNN. One proponent of the coin, according to the U.S. Money Reserve president, is “the company that makes the blanks by which the U.S. Mint makes coins.” He went on to highlight that the company is “a friend of the penny and is willing to spend money in Washington, D.C., to preserve it.” Diehl also commented that “the Illinois congressional delegation is not enthusiastic about eliminating the penny because, of course, Abraham Lincoln is featured on the penny.” He did note, however, that Lincoln is also featured on the five-dollar bill—and thus would still have a place on U.S. currency.
About the Company
U.S. Money Reserve is a well-known distributor of government-issued currency and precious metals. Owing in part to Diehl’s expertise at the crossroads of public policy and the pursuit of private financial freedom, the company has built a strong reputation for helping customers build portfolios that help serve their financial goals. The company’s highly trained account executives reinforce this reputation and have bolstered U.S. Money Reserve’s customer service credentials over the years. This combination of expertise and focus on customer service has earned the company an AAA rating from the Business Consumer Alliance.
With the recent vote from the U.K. bringing renewed relevance to the issue in the U.S., the existence of the penny is again becoming a focus of debate. Though opinions continue to be split on whether or not to do away with the coin, it is clear that some compelling concerns warrant consideration. The recent CNN appearance by Diehl not only helped shine a light on the debate, but also highlighted some of the issues that must be navigated to move forward on the initiative. Those interested in the topic or other issues pertaining to government currency would be well served to watch the interview in its entirety